Oversold Stock of the Day: Galapagos NV (GLPG)
The market has been picky with healthcare stocks lately. Firms developing Covid-related vaccines have fared well, while other companies have been more subject to specific operating performance. Case in point? Galapagos NV (GLPG), a Belgian biotech firm whose shares have been trending down and are now oversold.
Share have slid from $110 to $84 in just the past few weeks. The big reason is that it is discontinuing its development of an IPF drug with Gilead Sciences. As any new drug costs substantial resources to develop, abandoning the development creates a massive loss now. It also means the loss of potential future revenue from a successful drug for years down the line.
That’s why shares have been heavily hit, but also why shares look oversold. The biotech is developing a number of drugs to combat a number of ailments, and still has a number of products in the clinical stage.
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Action to take: The July 2021 $90 calls, last trading for about $8.50, could rebound strongly here. Traders should look for mid-to-high double-digit returns on a bounce higher.
Since the overall long-term trend in shares is down, traders should look to take quick profits, possibly as soon as shares post a strong rebound day. While the trade could move in-the-money on a prolonged uptrend, traders who look for reasonable profits are likely to avoid losing money.